The use of electronic placement is increasing in the Lloyd’s market. But we are keen to see the market adapt to enable the entire negotiation process to take place online.
There is no doubt that, since the announcement of the Lloyd’s electronic placement mandate, which required syndicates to write a minimum proportion of their risks electronically, there has been a material uptick in the use of the market’s Placing Platform Limited (PPL).
In March, Lloyd’s issued a mandate that, from the end of the second quarter of the year, each syndicate should write no less than 10% of its risks electronically, with this proportion increasing to 20% in Q3 and 30% in Q4.
The increase in use of electronic placement is encouraging. But it only tells part of the story. In a very large number of instances, the electronic platform is only being used at the end of the process - the firm order stage (and in some cases after lines have been committed by email or bound on paper).
For our members - underwriters - this means that they have already carried out a great deal of work without reaping the efficiency benefits that electronic placement brings. Furthermore, if negotiations have been largely paper-based, once a piece of business reaches the firm order stage, there is a great deal of checking to be carried out - and, if any information is incorrectly entered on the electronic platform, the whole process must start again.
That is one of the reasons that, at the LMA, we are pressing for system improvements to support online risk placement (submission of risk information, quote, negotiation and bind). This, we believe, is where the real efficiencies of electronic placement will be derived for underwriters. Adopting an electronic placing system that assists face-to-face negotiation with early provision of structured data, straightforward contract negotiation and clear and efficient binding would produce clear benefits to the market.
We are hopeful that PPL can be adapted to enable contract negotiation to take place electronically, and/or that other systems which do allow electronic negotiation of contracts be made available.
Electronic placement has the potential to bring real efficiencies in the insurance chain. We hope that underwriters will soon be able to benefit more widely from those efficiencies.